Category Archives: wine price

Is the current U.S. wine market the new “new normal” — can the recent upmarket shift in wine sales be sustained into the future? Two recent Wine Economist columns have detailed the surprising bifurcation of the U.S. wine market and tried to understand what forces are behind it. Wine sales below about $9 are stagnant or falling while upmarket sales revenues are increasing, with the largest percentage rise in the $20+ segment.

This is a surprising state of things, I argued two weeks ago, because the conventional wisdom once held that the Great Recession had created a “new normal” that centered on trading down behavior and discounting strategies. Not many people argued that we’d be “trading up” in the post-recession world.

And, as I noted in last week’s column, it is not clear that it is a simple return to previous behavior. I analyzed several theories for the change and concluded that none of them told the entire story, but together they explain the situation fairly well. So now we have to ask if those trends will continue — if the new market structure is the new “new normal” — or if the upmarket movement is unsustainable.

My answer — typical of an economist — is that it depends. It is really too soon to tell what will happen in the long run because there are so many unpredictable factors to consider. But since I asked this question I feel I ought to give more of an answer, so here’s my attempt at crystal ball gazing.

It’s too soon to tell about the U.S. market in the long run, but the current pattern is likely to be sustained for the medium term, although not necessarily due to the same factors that created it in the first place. Here’s my reasoning.

Decline and Fall of Down-market Wine

Inexpensive wines are not going away, but it seems unlikely that they will soon return to solid growth. This might be because of the alleged “bad wine” effect that I talked about last week, but it is more likely due to supply-side effects.

With water issues rising to the surface almost everywhere and higher irrigation costs in many places, the economic sustainability of low-cost wine grapes is in serious doubt at current prices. Jeff Bitter’s presentation at this year’s Unified Symposium in Sacramento included photos of acres of healthy Central Valley grapes left to rot on the vine because they were not worth the cost of harvest this year and probably not worth irrigation costs next year.

What is the future of these vines? Thousands of acres of vines have been grubbed up in California in recent years to make way for other crops with higher potential value — almonds and pistachios are the most frequently cited crop alternatives, but I’m sure there are others. Imported bulk wines can easily fill in the gap left by falling California production in the short run, but sustainability issues (both economic and environmental) are a global phenomenon.

Low-cost wine grapes (and the wines they produce) are not going away, but there is limited incentive to invest here and so the focus is upmarket, where margins are better and business sustainability is more feasible.

Up the Down Staircase?

The upmarket movement in wine sales is likely to be sustained at least for some time because it is driven by factors affecting both demand and supply that are not specific to the U.S. but part of strong global trends. The supply-side element is easy to understand. Intense competition has cut margins on basic wines to the bone (and even deeper than that in some markets). Follow the money, Deep Throat said, and wine producers are listening to that advice now more than ever.

Once again, that doesn’t mean that basic wines and the bulk wine trade that has evolved around them are going away. It is simply that this is not the market segment that will get investment in future. Producers are likely to focus even more on the premium, super-premium and ultra-premium segments in the future. Every wine producer I have talked with around the world is focusing on moving up the up staircase and plotting effective distribution and marketing strategies.

On the demand side I would point to the increasing importance of retailers like Trader Joe’s and Whole Foods and their many upscale local market competitors that attract customers by providing them with a sense of authenticity and affordable luxury in the quotidian consumption experience.

Products of origin and artisan creations with sustainability credentials — these are the hallmarks of the new retail environment and upscale supermarkets and a growing number of their customers seek out wines that fit that profile. Even hard-discount Aldi is playing along on the wine aisle, providing unexpectedly premium wines in their U.K. stores.

Bronco Busting

Don’t believe that the shift is important? Well, it wouldn’t be the first time that I’ve been wrong, but I think you will find evidence all around you if you look for it. Let me give you just one data point to get you thinking.

Consider the Bronco Wine Company, the famous maker of Two Buck Chuck and many other inexpensive wines. Bronco chief Fred Franzia once said that no wine should cost more than $10 and he built the 4th largest wine company in the U.S. by making those wines both for his own labels and, under contract, for other firms.

Where is Bronco headed today? Well, Two Buck Chuck is still in the picture and I think it is probably still selling about 5 million cases a year as it was the last time I wrote about it. But Bronco is busting out of that market segment via a variety of new products that, while they don’t aim for Screaming Eagle or DRC cult status still fit the profiles I’ve outline here. Several of Bronco’s wines illustrate the upmarket trends that I see for the future, including Garnet and Green Truck.

(Editor’s note: Bronco is the sales agent for Garnet but does not make this wine — see Alison Crowe’s comment below, which clarifies the relationship. Thanks to Alison for her correction.)

The long list of wines that Bronco produces and/or distributes includes six different organic wine brands plus a number that are vegan-friendly. Green Truck wine from Mendocino County is a good example. The wines are made from organic grapes and when I searched to see the nearest retailer to me there was Whole Foods near the top of the list.

Buckle Up!

Wine is looking up! The new normal will focus on wines that tell as good a story as other contemporary market products, such as craft beers and spirits and locally-sourced food products. It’s a great opportunity for wine producers, but the market is very competitive and will only get more so.

Buckle up! It’s going to be a wild ride.

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I thought you might enjoy this 2007 video of wine critic Oz Clarke and “Top Gear” presenter James May meeting Bronco’s Fred Franzia. Their reaction to Two Buck Chuck may surprise you. Cheers!

Last week I wrote about the unexpected state of the U.S. wine market today, where sales of wines above about $9 are strong and growing while the below $9 segments are stagnant or in decline. Thinking back to the dismal state of the wine market a few years ago, with trading down and heavy discounting, the current situation comes as a big surprise.

What accounts for the transformation of the U.S. wine market? And is this the “new normal” that we should expect for future years? Let’s look at the emerging conventional wisdom on these questions.

Trading Up?

I don’t know many people who think that the shift toward more expensive wines is a simple reversal of the recession years’ trading down, although that doesn’t mean that it doesn’t happen. Consumers seem as price sensitive as ever, which is why store shelves are still papered with “shelf talkers” like the one shown here that beckon buyers with discounted prices.

Yes, discounting is still going on, although perhaps not quite at the same level as during the Great Recession. The best argument for trading up is that consumers who had an opportunity to sample better wines during the deep discount days and liked them now are feeling more economically secure and are continuing to buy them at higher prices. I’m sure that this is happening to a certain extent, but I don’t think it is the whole story. Consumers are simply too focused on price to have suddenly changed.

Price resistance means that most consumers aren’t willing to pay more for the same or similar wine, but they are willing to spend more for something different. Who is doing this?

The Millennial Theory

One theory holds that the changing shape of the wine market is driven by younger wine drinkers — we often call them the millennials here in the U.S. but I have also seen the term “echo boomers” used and Constellation’s latest Project Genome study calls them “engaged newcomers.” As a group they tend to buy wine less frequently than some other groups (they also drink spirits, craft beers and so on) but spend more per bottle. This is the opposite of my behavior as a young wine drinker and probably a good thing.

If what we think we know about millennials is true, then they can account for some of the trend towards higher price wine sales, but they are certainly not the whole story. They don’t explain the shift away from lower-priced wines because they were never the driving force there. And they cannot account for all of the upmarket shift because at this point they don’t buy enough wine to move the whole market this way. Millennials are part of the story, but not the whole answer. What else?

The Bad Wine Theory

One very interesting theory is that the relative quality of wine below about $9 has fallen, driving customers away in search of something better to drink. They have found it, too, in craft beers, ciders and spirits.

A recent article on Bibendum’s website tells the sad UK story, which this graphic illustrates. If you want to get value in wine in the UK, it seems you have to move upmarket. The actual cost of the wine is more than a third of the total cost of a £20 bottle, but less than 10% of the cost of a £5 wine. Shocking!

This deteriorating value of inexpensive wines, if true, is a surprising situation. Only a few years ago we experienced something of a revolution when the character of commercial quality wine improved quite dramatically (I called it the Miracle of Two Buck Chuck in my book Wine Wars). A structural surplus of decent wine and grapes on the U.S. and world markets made it possible for winemakers to assemble products at low price points that rivaled some brands in higher price segments. The unexpected value they provided drew millions of consumers into the wine markets Is poor quality and value pushing them away?

Well, poor value is certainly part of the answer in the U.K., where high wine duties have distorted the market and undone much of the miracle of the past. And I have some friends in California who complain that cheaper and lower quality bulk wine imports are now filling bottles of California-brand wine. The brand is associated with California (like Barefoot, for example) but the wines themselves come from many places (and are so-designated on the packaging).

Have quality and value suffered? I’m an economist not a wine critic, so I will leave it up to you to decide, but some of my California friends think that’s what’s happened. If this is true, then where is the better California wine going? Some of it is sitting in tanks, which are pretty full after a couple of generous vintages in a row. The rest? Some of it, I think, fills the bottles of wine brands specially created for the new market environment.

The Branded Age

This supply-side theory holds that smart wine executives have noticed that many consumers are willing to pay more for something different (and are put off by the commodity wines) and they have responded by creating new brands to fill specific upscale market niches. This helps explain the great proliferation of wine brands and even virtual wineries on the scene.

Each year I enjoy Jon Fredriksen’s talk about the state of the U.S. wine market at the Unified Wine and Grape Symposium, but recently I have noticed that his list of the hottest wine brands is full of unfamiliar (to me) names. These aren’t new wineries, simply new brands created by innovative existing large- and medium-sized wine firms.

Jon’s data suggest to me that these are some of the wines that are attracting buyer interest and pulling the market along. An example? Take The Wine Group, which is the second largest wine producer in the U.S. with 57.5 million case sales according to Wine Business Monthly. A few years ago I thought of them in terms of brands like Almaden and Franzia wines, which are in that lower market tier that is stagnating today.

Now when I think of The Wine Group I think of Cupcake Vineyards, which at 3 million cases is small compared to Franzia’s 26 million, but perfectly fits that upmarket profile and is often priced right at or just above key $9-$10 threshold along with Apothic, 14 Hands and other hot brands.

Which Theory? The New New Normal?

No single theory explains what has happened and the market is full of special cases. Take Argentinian wines, for example. Customers are buying more expensive products from Argentina now in part because the cheaper labels have disappeared. With inflation still soaring and the exchange rate stuck, many Argentinean firms cannot afford to export cheaper Malbecs to the U.S., which shifts the center of gravity upmarket.

All these ideas (and others, too) are part of the explanation of today’s transformed market. It’s a perfect story of effects (or a train wreck, depending which end of the market you are in). Is this the new “new normal” and, if so, how long will it last? That’s a question for next week.

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Thanks to everyone who commented on last week’s columns — great ideas! Keep them coming.

Let’s climb in my time machine and go back a few years to 2008-2009, when the impact of the global financial crisis was beginning to be felt in the wine markets. It was a pretty gloomy time and there was a lot of talk about the need to reset our expectations to the “new normal.”

Gone were the days of great expectations as everyone scrambled to cope with the changing economic and consumer environment. What did we imagine the future would hold? Well, opinions varied, of course, but the “conventional wisdom” generally revolved around a few dire trends.

Trading Down and Trading Over

One of the most-cited trends was trading down. It sure looked like wine consumers were pulling away from wines at higher price points and shifting to less expensive products — or even moving away from wine altogether. Here’s a video that captures the moment fairly well (it was the first time I was ever interviewed by an animated character)

Trading down seemed like an unstoppable force at the time, although I suggested that it was more complicated. I noticed the strength of the Barefoot wine brand and proposed that it wasn’t just the price of the wine that made it so appealing to recession-battered wine drinkers, it was also the casual image that it offered with its surfer dude footprint in the sand style.

No one wants to admit to themselves that they are trading down, I wrote. Not good for self-esteem. But we can all embrace the idea of trading over — over to a more relaxed, less serious (and incidentally also maybe less expensive) idea of wine. Relax (there is even a brand of Riesling called “Relax”) and just enjoy wine. That’s what I thought I saw in the marketplace.

The $20+ Dead Zone

Whether it was trading down or trading over, the result was the same: the $20 and up segment of the wine market was declared a “dead zone” where nothing moved. People still drank more expensive wines, then just didn’t buy them. They “drank up” from their cellars rather than “trading down” at the wine shop.

Wineries found that many wine club members were pulling back from scheduled shipments. Restaurant wine sales took a very big hit, too, as consumers dined out less frequently and economized on wine purchases when they did. Restaurants coped by trading down themselves, putting more pressure on wineries.

Dumping, Discounting and Flash Sales

Some wineries held their prices and absorbed inventory accumulations rather than discount or dumped excess wine on the bulk market (where Cameron Hughes and others found some outstanding bargains for their customers). They saw price cuts as a one-way street. You can lower prices, but can you raise them back up again when good times return? Some wineries split the difference by bringing out second labels to sell for less — chateau cash flow wines — while holding the price line on prestige brands. Lots of mistakes were made along the way and some wineries fell out of the market.

Many discounting strategies were rolled out. Safeway stores began running promotions where $20+ wines could be purchased for 30% off the regular price (or 40% off with a 6-bottle purchase) — a clear attempt to reduce inventories in the “dead zone” category. A number of “flash sale” wine websites appeared that allowed wineries to sell off surplus stock quickly and outside of the usual sales vectors.

Sometimes wineries found themselves caught in competition with their own wines as buyers (wine club members, restaurants, a few distributors) dumped their stock back on the market, under-cutting carefully calculated producer pricing strategies.

There were some great bargains for buyers who recognized them (and had the credit card headroom to take advantage), but there were not very many true winners among wine producers, especially those in the higher price ranges. The frankly defensive strategy of generating cash flow while protecting key price points was the best that many wineries could hope for.

Up the Down Staircase

Would consumers shift back when the recession was over? Not many people held out hope for a reset of the reset. So the current state of the U.S. wine market, which Jon Fredrikson has called “A Tale of Two Markets” comes as something of a surprise.

The U.S. wine market has split in two as the table above shows. (The table shows recent data for off-premises wine sales as measured through the particular retail channels monitored by the Nielsen Company. These data are indicative of what’s going on in the broad market.)

While the market is expanding at a moderate +3.4% pace (at least it is growing, unlike wine markets in some Old World regions), there is a clear division between wines selling at prices below $9 and those that sell for more. Although the cheaper wines make up the majority of the market by volume, they are shrinking in dollar sales value, especially the $6.00 to $8.99 segment.

The New Conventional Wisdom?

More expensive wines, on the other hand, represent a rising market segment. All price segments over $9 are growing as per these data, with the fastest growth at the highest price point — $20 and above!

This is truly a dramatic turnaround for U.S. wine. What is behind this unexpected change? I’ll survey the new conventional wisdom in my next column.

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BTW that’s a really old picture of me in the video — I hope that I’ve improved with age since 2008. The Costco reference is a bit off in that interview, too. Costco sells wine at a low mark-up, but they don’t try to compete at the very bottom of the market as the video images suggest. I don’t think I’ve ever seen boxes of Franzia at a Costco, for example.

How will the rising dollar affect the U.S. wine market? The answer, predictably, is that it’s complicated. Read on for analysis organized around three questions. Why has the dollar appreciated? What are the textbook effects of a rising dollar? How and why is the impact on U.S. wine likely to be different?

Why has the dollar appreciated?

The U.S. dollar has appreciated dramatically on foreign exchange markets, powered by several factors. Expectations of higher interest rates in the U.S. is a big part of the story as the reality of the end of the Federal Reserve’s asset purchase program sinks in. Add to this the fact that the Europoean Central Bank is finally close to beginning its own quantitative easing program, which will keep rates down on that side of the pond. This combination is a recipe for the sort of change you see in the graph above.

The relative strength of the U.S. economy, weakness of the E.U.with its potential “triple dip” recession and uncertainty regarding China and oil prices all contribute to the economic environment that has helped fuel the dollar’s recent rise. Where is money going to go in a risky world? Can you say USA? A lot of us have been impatiently waiting for the dollar to move higher for a couple of years. Now that it has happened, what should we expect?

What are the textbook effects of a rising dollar?

The classic textbook effect of a rising currency is that imports increase because they are relatively cheaper and exports decline because they are costlier to those holding foreign currencies. Imports up, exports down. That’s where the Econ 101 story often stops, but the situation is a little more complicated.

Prices adjust faster than quantities in most cases. Price effects (rising export costs, falling import prices) tend to happen quickly, but quantities take longer to change because of inventory lags, recognition lags, and contract lags. Basically, it takes time before the new exchange rate translates into real actions because existing inventories must be depleted before new orders are made, because it takes some time before economic actors feel certain that the change is sustained and not just a market blip, and because existing contracts often preclude immediate adjustments.

These lags create what economists call the “J curve” effect, with opposite short-term and long-term payments impacts. The Econ 101 results take longer to show up in significant amounts than you might think and even then will only appear if other intervening economic factors don’t offset them. So predicting the short term impact of an exchange rate change isn’t as simple as you might think even if you earned an “A” in Econ 101.

But price is a powerful force, and the fact that a rising dollar makes our exports more expensive to foreign purchasers (and imports cheaper for U.S. buyers) should not be ignored even if immediate run impacts are not obvious. Don’t expect everything to change at once.

One more complication is that although we like to talk about the dollar rising or falling, the overall trend conceals the fact that the dollar might be higher relative to one currency and still falling compared to another. During one recent period when the dollar was quite weak by some standards, for example, it still rose compared to some other currencies that were even weaker.

How and why is the impact on the U.S. wine markets likely to be different?

Given all this, it is instructive to read a 2012 report by Kym Anderson and Glyn Wittwer titled “Studying the impact of exchange rate movements on the world’s wine markets, 2007-2011” (a University of Adelaide Wine Economics Research Centre working paper — the link takes you to a pdf of the paper). The Anderson-Wittwer study examined the impact of exchange rates on wine trade during a period when the dollar was falling instead of rising and finds that the impact of exchange rates was different in different import markets and in different wine market segments. (I told you it was complicated!)

In the U.K. market, for example, the exchange rate impacts were pretty much what theory suggested both in terms of import effects and distribution among different wine exporting countries. A good textbook case.

The wine drawback program allows a refund of 99% of import duties and excise taxes on wine for which the importer has matching exports of commercially “interchangeable” wine. Because per-unit import duty and excise tax rates are substantial compared to the price of bulk wine, use of the program is high for bulk wine imports, which compete with wine from low-price Central Valley grapes. Bulk wine exports dominated imports until 2009 and the program stimulated import growth. Now, with imports and exports roughly in balance, the program stimulates both exports and imports—leaving net trade in bulk wine roughly in balance.

– Summary of the U.C. Davis Report

The Anderson-Wittwer study found that the falling dollar had different effects on U.S. consumption of Old World and New World wine imports during 2007-2011. Old World imports increased despite the dollar’s fall and New World imports fell. Obviously the price effects were more strongly felt for New World wines than for Old World products (see Table 6 of the report) and although Australia accounted for much of the import decline and may be a special case in some ways, Argentina, Chile and South Africa were also negatively affected.

The study found differences by price category, too. Non-premium and commercial premium New World wines were the most affected by the exchange rate changes while super-premium wines showed less impact. This makes sense because the lower priced products are often part of the bulk wine trade, which has become highly efficient, facilitating ease of substitution from one country’s products to another. A small change in cost can have a big impact on the size and direction of trade. Textbook effects rule here.

More expensive products benefit from greater product differentiation. The power of an established brand acts as a shock absorber when costs increase, although there are obvious limits to this.

It’s Complicated

So if Old World imports increased and New World imports fell during the period when the dollar was slumping, can we expect just the reverse now that the dollar is soaring? It would be great if we could just take the Anderson-Wittwer numbers and change the signs from plus to minus and so forth, but life is more complicated than that. Anyone who has tried to sell wine can tell you that it is easier to lower a price than to increase it! It’s a kind of hysteresis in the sense that where you can go now depends on where you have been. You can’t just back out to where you started.

That said I think there are important insights to take away here, key among them is the idea that the impacts are likely to be different for bulk wine and packaged good trade and for Old and New World products.

Textbooks and research give us good guides to understanding the impacts, but there aren’t any simple answers. And the exchange rate isn’t the only thing that’s changing this time around. I know a number of New World producers who made big bets on the Russian market, for example. Seemed like a good idea at the time, but my how things have changed! They’ll be desperately looking for markets for the wine they can’t sell to Moscow. And imports from Argentina may be more affected by that country’s domestic policies (and the upcoming elections) than exchange rates.

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It occurs to me that this column is a classic example of what Paul Krugman once called “up and down economics.” This goes up, that goes down, and so on. Made me think of the Winslow Homer painting “Right and Left” that you can see in the National Gallery in Washington D.C.

Are wine prices too high? Or are they too low? Two prominent wine writers raised these questions in different columns and it is worth pondering them separately and then together.

Tim Atkin: Race to the Bottom

Tim Atkin recently complained that British wine prices are too low in a column titled “Mad Frankie Fraser and the Price of Wine.” The average price of wine in the UK has risen slightly in recent years to £5.50 (about $8.75 at recent exchange rates), but the increase is mainly due to rising taxes (I have called this the UK government’s “war on wine”), which disproportionately impact lower-priced wines.

UK consumers resist paying more (having been trained by supermarkets to look for loss leader 3-for-£10 sales and BOGOF promotions), so the tax burden has been shifted back onto producers, who apparently have had to cut corners to cut cost and try to hang onto what were already slender margins.

The result, Atkin says, is that the quality of the average bottle of wine is now very low, which damages the reputation of wine generally. You used to be able to find a few nice wines at £5, Atkin says, but not any more with the tax soaking up so much of the retail price. £5.50 is the average and so if these wines are unworthy of attention, you can just imagine what must be true of the many wines selling for less.

Wine needs to cost more to be better, according to Atkin. Some UK consumers have figured this out, of course, and so the market, which is always segmented, has become even more bifurcated with one market for decent wines and another for mediocre stuff.

The problem is approaching crisis, according to Atkin. “I hesitate to say this, but maybe what wine needs is a minor scandal that exposes the way bargain basement wine is made, blended and traded,” he writes. “Otherwise, I can’t see the UK’s polarised wine markets converging. It would take more than a sadist with a pair of pliers [the Mad Frankie Fraser of the column title] to change the wine buying habits of a nation.”

The Amazon-ification of Wine?

Atkin focuses on the impact of low prices on wine quality in the particular UK market environment, but there are other reasons to be concerned about bargain pricing. In the publishing industry, for example, some people are concerned about the larger implications of Amazon.com’s continuing quest for market share through low prices for books and ebooks.

The argument here is that by driving the price of books so low Amazon risks turning literature into a commodity. In the short term it might get more books and articles into more hands (and Kindle e-readers). But since consumers have a tendency to equate price with value, will this ultimately devalue the entire industry? Will literature become simple interchangeable “content?”

You can see how this argument might apply to wine. If wine is so cheap that it is no longer seen as having any special qualities, will it lose its distinctive identity and become just an alcoholic beverage, vulnerable to competition from beer, spirits and cider? Has this already happened? Perhaps it is has in the UK, especially if Atkin is right about collapsing quality.

This is food for thought, although the theory depends upon a lot of assumptions. Some say that Amazon.com’s book prices are not so cheap as they once were because the company needs book profits to fund its rapid expansion into other markets. Are book prices too low? I don’t know. Are wine prices too low? Or … are they too high?

Fine wines are a luxury, Kramer notes, but it used to be possible to actually drink them occasionally and to really enjoy their special qualities. Now, however, the prices of the best wines get bid up to stratospheric levels and the top wines become trophies that are collected and exchanged but not necessarily consumed.

Kramer gets to taste these wines on occasion because he’s an influential wine writer, but even he isn’t able to actually drink them — to enjoy them in the ordinary way that wine is meant to be enjoyed. For the rest of us who are not famous wine writers, the wines might be like works of art in a museum. Look but don’t touch (or sip).

“Now, tasting for exploratory or analytical purposes, such as occurs with critics or anyone’s learning experience, is not only essential, but admirable,” Kramer writes. “But there’s a limit. If you’re buying wines only to “taste,” then you’ve museum-ified wine. And that, I feel free to say, is not just mistaken, but genuinely wrong. It objectifies wine. It denatures the experience, transmuting pleasure into comparative performance.”

Touchstones No More?

I framed this issue in a less sophisticated way in my 2013 book Extreme Wine (see chapter 5 on “Money Wine”), focusing on cultural significance. I compared the great Bordeaux wines to grand opera not museum displays. Once upon a time opera was the music of both the masses and elites, I wrote — everyone knew and sang, whistled or played the tunes and arias — it was a basic cultural reference point. And fine Bordeaux was once a fundamental reference point for wine in about the same way.

But things have changed. Opera, with its elaborate productions, costumes, orchestras, singers, chorus and sometimes dancers, is now perhaps the world’s most expensive art form and the prices of the best Bordeaux are sky high as well. Both risk being priced beyond the means of wine and music lovers and must work to maintain there relevance. Bordeaux almost disappeared here on the Pacific coast (Costco seems determined to bring it back now, if the current wine selection is any indication — or maybe they just got screaming deals). Opera’s niche seems more secure, but is still vulnerable.

I develop this idea in greater detail in Extreme Wine but hopefully you get the drift of the argument from this quick summary. Both opera and Bordeaux are still great and we love them, but they are now different in terms of their cultural significance, no longer the touchstones they once were. Have they become museum-pieces as Kramer argues? Perhaps.

A Golden Age Slipping Away?

So are cheap wines too cheap and fine wines too expensive? Prices are what they are from an economic standpoint (it’s that demand and supply thing), but we can evaluate their effects. I think both Atkin and Kramer make good points, although it is hard to know how to change the dynamics they have identified.

Fortunately the cheap wine situation is different here in the U.S. where the war against wine was fought and lost back in the Prohibition era. It took a long time to recover, but we’ve won many battles since then and wine is on the upswing. I think the Two Buck Chuck revolution of the early 2000s raised the standard for inexpensive wines, for example. Today’s inexpensive wines are not to everyone’s taste, but they undeniably achieve a commercial standard that the British, with their high taxes, might envy. The high prices at the top that Kramer bemoans and the problem he outlines exists just about everywhere, however.

Jancis Robinson recently called this a golden age for wine and said that our challenge is to make the most of it. I think she’s right. Atkin and Kramer are doing their part to try to keep all the gains we’ve made from slipping away and we should help out.

It may be cold comfort to some, but there is a world of wines that exist between the extremes that Atkin and Kramer represent. Wines that are interesting and sometimes inspiring — and that people can and do buy, drink and enjoy. That’s what we all should do at this holiday time of the year. Embrace the golden age: find these wines, share and enjoy them as they should be enjoyed.

So two cheers to the golden age of wine, with a third cheer in reserve to use if reserve if we can find a way to navigate the obstacles that Atkin and Kramer have charted. Cheers to all!

No individual speaker focused specifically on craft beer and cider, but it’s fair to say that they were the 300-pound gorillas in the room. The reporters present picked up on a comment here and a mention there and effectively connected the dots. Let the good times roll? Or roll out the “beer” barrel? Hard to tell which was the stronger message.

I was one of the dots along with UC Davis dean Robert Smiley and others. I spoke about the trends I have observed traveling the world in the past year and one of them is the rise of craft beer and cider and their growing incursion into the wine space. I see it everywhere and the people I meet are often surprised that it is a widespread phenomenon. I thought it was just something that’s happening here is a common response.

As if to illustrate my point, the post-conference reception featured a number of nice wines from Napa area wineries plus a Napa-based craft brewer who was pouring three or four interesting products. Can you guess what many of the wine people were drinking? You guessed right if you said that it was beer.

The price is right?

Which makes sense because sometimes the best wine is a beer (or a cider). That’s not just a fact of life, it’s also the title of a chapter in my next book, which is set for release next fall. The book is called Money, Taste & Wine: It’s Complicatedand it’s a collections of essays, rants and raves about the crazy business of wine.

The gist of the chapter (and part of my remarks in Napa and also later in London at Wine Vision 2014) is that inexpensive generic wines can be pretty uninspiring in a world where upscale consumers look for distinctive products like they find at Whole Foods and see on Food Network shows. For about the same price as that generic wine you can purchase a really distinctive craft beer or cider. And while the best wines can cost hundreds, the top of the craft beer category is not that many dollars above the middle market. The relative cost of really distinctive products versus generic plonk can be much less for beer than for wine.

In other words, if you want to feed your terroirist soul, you might find craft beer or cider a very cost effective alternative to wine. Obviously I develop this idea more thoroughly in the forthcoming book chapter, but I think you probably get the idea already. Just go to an upscale supermarket and stare at the beer case and cider shelf for a while. You may be impressed by the sophisticated products you see and the reasonable (compared to wine) prices they fetch.

I’m especially taken with the new ciders I’ve encountered. Ciders come in many types — blends, single variety, oak-aged and so on. There are even ice ciders that, like ice wines, are made from naturally frozen fruit.

No need to fear beer …

Beer and cider also have a number of supply side advantages over wine. Because grains and apples can be stored for months you can make batch after batch of beer and cider pretty much continuously through the year. With wine you get one shot at fermentation and that’s it. This gives beer and cider more production flexibility and permits small lot seasonal experimentation, too.

So should wine “fear beer” as the story headline suggests? No, but wine needs to take these products into account and respect them as strong competition. Honestly I don’t think craft beer and cider are threats, but I do see them as challengers. If we don’t want to lose customers to these innovative products, we need to up our game and make sure that wines at key price points have the quality to compete.

Prosecco sales here in the U.S. are surging — up 34% in the first half of 2014 according to one report. At 1.27 million cases, the U.S. is now the #3 export market for Prosecco trailing only the UK and Germany.

Quantity is one thing, but quality is often something else entirely. Last week’s column talked about Prosecco’s upmarket move and the premiumization pyramid that lies at the heart of the strategy. Is premium Prosecco real or just a marketing gimmick?

Mionetto’s Impressive Line-up

We tasted the wines from three producers during our quick business trip to the Veneto and if there is truth in wine, then premium Prosecco is real.

Our first stop was at Mionetto, a large producer that is the U.S. market leader with their popularly priced, crown capped “IL” Prosecco line of wines. “IL” is great fun and has attractive packaging — we like it a lot — but it doesn’t especially strive for upmarket status. But wait, there is more …

We tasted through several Mionetto wines that showed the true potential for premium Prosecco wines. We started with Prosecco made from organic grapes — the idea came from the growers not the marketing department — that was perhaps the most effective presentation of an organic wine that I have seen. This wine should appeal both to enthusiasts seeking something different and to dedicated green wine fans. The wine, the messaging, the packaging — they all come together in a very impressive way.

Opulence and a German Bet

We then moved up the pyramid to a single vineyard “Rive di Santo Stefano” DOCG Prosecco and into the “Luxury” series of wines, then reaching the summit with the Mionetto Luxury Cartizze DOCG. The luxury wines really were opulent both in the glass and to the eye. Very impressive. Will wines like this some day challenge Champagne? No future tense needed — I think they already do so, providing that memorable feeling (isn’t that what Champagne is really all about for most people?) at a more attractive price point. Here is a list of the Mionetto wines we tasted with links to more information about them.

An interesting sidebar to the Mionetto story is that the Italian firm was purchased a few years ago by Henkell, the German sparking wine producer, and everyone worried that the usual layoffs and cost-cutting measures were in store. Instead the new parent company kept all hands on board and hired more workers while investing in plant modernization and expansion. They are betting on the premium future of Prosecco and based on the “cards” we tasted it seems they have a winning hand.

A Different Prosecco: Sorelle Bronca

Sorelle Bronca is a very different enterprise that illustrates Prosecco’s many dimensions. A small firm run by two sisters, all its wines are organic. Total production is much smaller than Mionetto, but the wines are perhaps equally diverse in the experiences they present the curious wine enthusiast.

Cloudy, a bit like a hefeweizen beer. I think “foggy” is the best word — look at the photo. Unfiltered, but not Difetto in my opinion. The first taste was just the wine, taking care not to disturb the lees at the bottom of the bottle. Good! Then we shook up the bottle and tasted it all together. Wow! Even better, Sue and I agreed. Champagne-like but still clearly Prosecco without the strong leesy taste you might expect because the sur lie period was so short. And quite an interesting mouth-feel. A Prosecco to surprise and delight. What fun!

A Bisol Mosaic at Venissa

We spent the night in Venice and set out the next day to visit Venissa, the ambitious vineyard project of the Bisol family that is located on an island in the Venetian Lagoon (see next week’s column for a full report). The Bisol Prosecco house is behind Venissa and as part of our visit Matteo Bisol arranged for us to taste several of his family’s wines along with dinner at the restaurant.

Usually, Matteo said, he would serve just one Bisol wine as part of a multi-course / multi-wine tasting menu, but he decided to use the opportunity to show us many difference faces of Bisol and Prosecco. It was quite an experience.

Bisol Relio Extra Brut 2009 came next, made from the Glera grape commonly used in Prosecco but using the classic method (secondary fermentation in bottle not tank). Different from the Sorelle Bronco sur lie wine — the Champagne style yeastiness more pronounced.

The last sparkling wine of the evening was the opulent Bisol Cru Cartizze DOCG –– from the prime Cartizze zone. I felt fortunate to taste wine from Cartizze both here and at Mionetto. A friend had warned me that Cartizze would be too sweet but I found both wines dry and well balanced. Prosecco, like Champagne, can be and is made in different degrees of dry and sweet and some styles are more popular than others in particular markets.

The final wine was sweeter but still very well balanced and it came as a complete surprise. It was Bisol Duca de Dolle Prosecco Passita — dessert wine made with air-dried grapes like a white Recioto, but aged in a modiied solera system you find with some Sherries. A unique experience — different from any of the other wines from this region we tried and not exactly like any other sweet wine, either. Matteo wanted to show us the variety of Prosecco expressions and he certainly succeeded.

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Final thoughts? The Prosecco mosaic caught me by surprise — Prosecco is not one thing, but many things and hopefully consumers who start with cheerful wines like the Mionetto “IL” bottlings can be persuaded to move up the Prosecco Pyramid to the DOCG and Rive wines and perhaps even summit with Cartizze and beyond to some of the truly unique wines we were fortunate to be able to sample. Thanks to the everyone who hosted us and to the Conegliano Valdobbiadene Consortium for arranging the winery visits. Next time: the story of Venissa.

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The Wine Economist

What would you get if you crossed the Wine Spectator, America's best-selling wine magazine, with the Economist, the world's leading business weekly? The answer is this blog, The Wine Economist, which analyzes and interprets today's global wine markets. The Wine Economist was named 2015 "Best in the World" wine blog by Gourmand International. Staff: Mike Veseth (editor-in-chief) & Sue Veseth (contributing editor).